Living Wage: High Time to Ask for a Raise!

20 December 2013

A blog by Wilbert Flinterman, the Senior Advisor on Workers’ Rights and Trade Union Relations of Fairtrade International. Fairtrade International will be reporting more on its living wage activities in the coming weeks. Read more about Fairtrade's perspective on workers' rights here.

Living wage has become a popular topic the world over. How can we ensure that the people who produce our food and the clothes on our back can put food on their own table and clothes on their back? Too often these debates remain aspirational, exploratory, but often don’t move us any closer to practical solutions.

As history tells us, any serious dialogue on living wage needs to involve trade unions. Without a strong voice for organized labour, projects put forth by retailers, brands and NGOs can quickly become cosmetic and superficial solutions. Major reputations are at stake in the game of social compliance management, where businesses try to reduce reputational risk by imposing all sorts of social requirements on suppliers at the bottom of the chain.

When social compliance management is more about saving face than making a meaningful change in the lives of workers, things will probably get worse instead of better for many of them. Without a clear voice of independent trade unions in global supply chains, solutions to low wage levels are suggested without considering negative side-effects. In some cases, the cure could be worse than the disease.

Let’s take a couple examples of ways to raise wages where workers’ interests are often not considered:

Increasing the yield of labour – This would be done to raise labour productivity and lower labour costs per product so that extra revenue could be directed toward better wages. If this can be achieved by reducing excess absenteeism or improving work planning, the effects on labour would normally be positive; though this is not the case when production is increased by cranking up the pace of work to the extent that older workers drop out.

Mechanization- Mechanization is understandable from a business perspective when high wages make workers more expensive than machinery for the same work. The remaining workers could be paid better. However, with few other formal jobs available, the ensuing lay-offs would drive many workers into the informal economy worsening their poverty.

Most of these options would allow brands and retailers to tell their customers that productivity increases and stricter norms for suppliers have led to better wages for workers, but those benefits would only come to the workers left standing after the dust of ill-considered interventions has settled.

Global union federations, and groups like Fairtrade International, tend to take a different approach to resolving wage issues in global value chains and instead look at the distribution of value through the whole chain as the key to improving poverty wages.

Contributing to greater fairness in global trade is Fairtrade’s raison d’être. We believe in mature, open dialogue between management and empowered workers and their organizations as the best way to bring solutions to labour problems.

However, workplace management does not have always the economic means to provide all the answers. Social dialogue has to extend along the entire chain to ensure that the companies driving trade in the chain allow suppliers the means to provide decent work conditions, including a living wage, while avoiding scenarios described above.

To be taken seriously, any living wage dialogue must be specific and concrete, and close the gaps in three key barriers:

The difference between the remuneration received by workers and the estimated living wage for the region;

The difference between the price received by the supplier for a product and the price needed to support a living wage for their workforce;

And finally the difference between the retail price of the product and the price point necessary to ensure that the supplier can pay their workforce a living wage.

For workers to negotiate effectively for a living wage and close these gaps, strong independent unions are a must. Without independent representation, employers cannot be held accountable for revenue sharing with workers beyond a legislated minimum wage level, assuming there is one.

Removing barriers for trade unions to effectively represent workers, is an essential piece of the puzzle of trying to improve wages, both in the South and the North. We can see it in the amount of attention generated by the fast food strikers in the USA and we see it in the unrest among UK retailers when they were faced with looming strike action by Colombian banana workers earlier in 2013.

At the recent European Conference on Living Wage organised by the Dutch and German governments, we presented our Living Wage project and revised labour standard. Seeing these discussions happening at such a high level demonstrates that the concept of living wage has become a mainstream topic on international development agendas. The next big step will be turning the talk into practical solutions that transcend borders and make a living wage a reality for workers across the globe.